Correlation Between American Beacon and Pear Tree
Can any of the company-specific risk be diversified away by investing in both American Beacon and Pear Tree at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining American Beacon and Pear Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Beacon Small and Pear Tree Polaris, you can compare the effects of market volatilities on American Beacon and Pear Tree and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in American Beacon with a short position of Pear Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Pear Tree.
Diversification Opportunities for American Beacon and Pear Tree
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between American and Pear is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Small and Pear Tree Polaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pear Tree Polaris and American Beacon is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on American Beacon Small are associated (or correlated) with Pear Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pear Tree Polaris has no effect on the direction of American Beacon i.e., American Beacon and Pear Tree go up and down completely randomly.
Pair Corralation between American Beacon and Pear Tree
Assuming the 90 days horizon American Beacon Small is expected to generate 0.97 times more return on investment than Pear Tree. However, American Beacon Small is 1.03 times less risky than Pear Tree. It trades about 0.21 of its potential returns per unit of risk. Pear Tree Polaris is currently generating about 0.2 per unit of risk. If you would invest 2,711 in American Beacon Small on August 31, 2024 and sell it today you would earn a total of 211.00 from holding American Beacon Small or generate 7.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Beacon Small vs. Pear Tree Polaris
Performance |
| Timeline |
| American Beacon Small |
| Pear Tree Polaris |
American Beacon and Pear Tree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Beacon and Pear Tree
The main advantage of trading using opposite American Beacon and Pear Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Beacon position performs unexpectedly, Pear Tree can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Pear Tree will offset losses from the drop in Pear Tree's long position.| American Beacon vs. American Beacon International | American Beacon vs. American Beacon Large | American Beacon vs. Fidelity Low Priced Stock | American Beacon vs. Europacific Growth Fund |
| Pear Tree vs. Pear Tree Quality | Pear Tree vs. Pear Tree Polaris | Pear Tree vs. Pear Tree Polaris | Pear Tree vs. Pear Tree Polaris |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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